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World readies for Trump tariffs even before his White House return

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Donald Trump’s inauguration promises to usher in an era of upheaval in global commerce, forcing governments around the world to scramble in preparation for a tariff onslaught even before he’s back in the White House. 

Soon after calls to congratulate the president-elect on his Nov. 5 victory, officials began quietly looking for ways to appease him while simultaneously mapping out ways to retaliate if needed. 

The threat to China is longstanding, meaning its leaders have had ample time to prepare defenses and retaliatory strategies. But this time around, Trump and the trade hawks he’s enlisted are broadening their scope in what threatens to be a more prolonged and unpredictable trade war than during his first presidency. not supported.

Mexico and Canada have borne much of the brunt of Trump’s trade threats since election day, prompting leaders from both American neighbors to publicly warn of retaliation. Others are making preparations behind the scenes — Vietnam’s officials have promised to buy more U.S. goods, the European Union has bolstered its ability to counter tariffs, while Indian officials aim to negotiate their way through the coming storm.

“Trump 2.0 trade policy seems to be much more radical compared to 1.0,” says Yeo Han-koo , senior fellow at the Peterson Institute for International Economics and former South Korean trade minister. “It’s like a prisoner’s dilemma — the best scenario for all these countries is to band together and then resist, but there’s a motivation for each country to race to get a better deal compared to your competitors.”

If implemented, Trump’s threats to increase levies on Chinese goods to 60% and to 20% for the rest of the world would transform the structure of global trade flows away from the U.S., according to Bloomberg Economics. Retaliation would exacerbate the shock. 

Behind the scenes

In Mexico, President Claudia Sheinbaum warned of the hit to U.S. inflation in response to Trump’s 25% tariff threats. The country has been quietly rolling out a strategy to reduce reliance on China. Developed over the last few months, the government’s plan includes tapping major automakers about sourcing components elsewhere. 

Law enforcement kicked off a country-wide “cleaning operation” with a raid on a Mexico City shopping complex filled with Chinese goods in November. The following week, Mexico announced its biggest-ever seizure of fentanyl pills, a drug Trump says is being smuggled into the U.S. from its southern neighbor. 

Mexico is set to scale up such efforts, carrying out searches for goods that entered the country without proper taxation. To that end, Mexico slapped 19% tariffs on goods imported through courier companies, a move that analysts said targets major e-retailers Temu and Shein. 

“If we coordinate on this, there won’t be any tariffs,” Sheinbaum said about working with the US in late November.

In Canada, outgoing Prime Minister Justin Trudeau flew to meet with Trump days after his 25% tariff threat. Following Trump’s suggestion that its northern neighbor become America’s 51st state, Trudeau shot back there’s not a “snowball’s chance in hell” of that happening. 

How the country approaches Trump has been thrown in limbo with Trudeau’s resignation. Behind the scenes, officials are examining export taxes on major commodities it sends to the U.S. in a move that would drive up American prices. 

When Trump enacted levies on $200 billion in imports from China in 2018-2019, Vietnam was one of the biggest beneficiaries as exports to the U.S. more than doubled. Up to 16% of the increase in 2021 alone was a result of rerouting of goods to avoid U.S. tariffs on China, according to a Harvard Business School white paper

Now, Vietnam — which has the fourth-biggest trade surplus with the U.S. after China, Mexico and Canada — appears to be in Trump’s sights. His trade advisor Peter Navarro called out the country by name in Project 2025, a right-wing policy blueprint. 

Vietnam’s leaders in recent months have made efforts to balance the relationship between China and the US. The country’s deputy minister of foreign affairs has vowed to buy more aircraft, liquefied natural gas and other products while Prime Minister Pham Minh Chinh has emphasized the need to “remove all remaining obstacles” with the U.S. 

Similarly, South Korea and Taiwan are considering plans to boost energy imports from the US to avoid Trump’s ire. 

Balancing act

Increased dependency on the U.S. as a source of demand makes economies such as Vietnam more exposed should Trump decide to apply a universal tariff on all imports, by undercutting the business case to build new factories. Apart from China, economies such as South Korea, Taiwan, Malaysia and Thailand would be more exposed considering their high trade orientation, economists at Morgan Stanley led by Chetan Ahya wrote in a November note.

South Korea was forced to revise down its growth outlook, partly as a result of the growing geopolitical tensions contributing to weaker demand for the country’s exports. A top national security adviser to Japanese Prime Minister Shigeru Ishiba said the country should be prepared for the U.S. following through on tariff threats, meeting with Trump’s team during a visit to the U.S. late last year. 

Then there’s the blow from second-round consequences.  

“If Trump’s tariffs lead to China’s exports redirecting to the rest of Asia — and they’re very competitive — it’s very difficult for countries to compete,” said Sonal Varma, chief economist for India and Asia-ex Japan at Nomura Singapore Ltd. “That is something a lot of governments are thinking about.”

Among those economies that are increasingly worried about unfair competition from China is the EU, which faces twin concerns of an influx of cheap Chinese goods — particularly electric vehicles — and a new wave of tariffs from the U.S. Officials there have already prepared a list of American goods it could target with tariffs in the event Trump follows through with his threats. 

Since Trump’s first term, EU member states have agreed to a new set of trade powers that will allow the bloc to strike back at third countries that use economic restrictions for political retribution. The EU’s new anti-coercion instrument strengthens trade defenses and enables the commission to impose tariffs or other punitive measures in response to such politically motivated restrictions.

Officials in Brazil appear less concerned about any U.S. tariffs, believing the nation can ramp up sales to other markets including Asian countries in the case it’s targeted. Indian officials are also allaying apprehensions for now, betting Prime Minister Narendra Modi’s good relations with Trump during his first presidency will continue and they have room to lower import duties for U.S. goods as part of any forthcoming negotiations. 

“Economies are just stuck between a rock and a hard place in many ways,” said Frederic Neumann, chief Asia economist at HSBC Holdings Plc in Hong Kong. “It’s a very, very difficult course to navigate to appease both US demands to decouple from China, but at the same time to remain economically engaged with China.”

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Accounting

IAASB tweaks standards on working with outside experts

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The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

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Accounting

Tariffs will hit low-income Americans harder than richest, report says

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President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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Accounting

At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

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